Last Friday afternoon The Food Industry Center and the Department of Applied Economics had the privilege of hosting Dr. Laurian Unnevehr of the USDA Economic Research Service for the 2012 James P. Houck Lecture on Food and Consumer Policy. Her presentation, Evidence Driven Policy for Addressing Obesity: What Does Economics Contribute? was an insightful look into what the field of economics is, and should be contributing, to the obesity epidemic.
Dr. Unnevehr started by talking about the costs and causes of obesity. She reported that the CDC estimated the direct health care costs of obesity to be about $147 billion in 2008, or 9%-20% of all health care costs. About half of this is paid by Medicaid or Medicare, making obesity a public problem. There are many causes of obesity including too many calories, an abundance of energy dense foods, and too little activity along with many structural reinforcements such as the availability of junk food in the hardware store. The difficult part of resolving the obesity issues though, is people know they should be eating healthier, yet changing their eating behavior is hard.
When addressing the obesity problem, there are 2 components: intervention and prevention. Much of the economics research about obesity has centered around interventions; one of the most popular being focused on prices and taxes. Dr. Unnevehr reported the evidence shows food demand is inelastic. This means you would need to drastically increase (decrease) prices on unhealthy (healthy) food to make a meaningful change in diet. The evidence has shown that input taxes (when sweetener that is added in the processing of a product is taxed rather than the product being taxed at the consumer level) are more effective. For example, a 10% reduction in sweetener consumption would require a retail tax of 40% or an input tax of 27%-43%. Input taxes have less of an impact on consumer surplus as well. Research has also shown taxing calories is most efficient because it accounts for substituted products.
However, she was sure to remind us the battle for prices is not over. In a graph of the Consumer Price Index of fresh produce and of cupcakes, cakes, and cookies you could see that "It's getting more expensive to do the right thing." She also showed a map of price ratios and regions where milk was more expensive than soda, noting high levels of obesity in these areas. Dr. Unneverhr reported that prices do matter in the long run and some studies have shown that higher prices for soda led to reduced BMI and higher prices for fresh fruits and veggies led to increased risk of diabetes. Since we don't know what effect prices have on obesity in the long term, there are still many questions that need to be asked including why the relative price of healthy alternatives varies across the United States and what would reduce the relative price of these healthier alternatives?
*Dr. Unneverhr also talked about food access, information, and standards in her talk. Check back in the near future to learn more about these topics!